Opposition Brief — Mirzoeff v. Namdar

C4 JUN 6 1991

No. 90-1705

OFFICE OF THE CLERK

In The

Supreme Court of the United States

tin

_-

October Term, 1990

ELI MIRZOEFF,

Petitioner,

VS.

MOTI NAMDAR,

Respondent.

On Petition for Writ of Certiorari to the Supreme Court of the

State of New York, Appellate Division, First Judicial Department

BRIEF IN OPPOSITION FOR RESPONDENT

BENJAMIN P. EISEN ERGER

Counsel of Record

LEWISOHN, EISENBERGER & FUCHS

Attorneys for Respondent

321 Broadway

New York, New York 10007

(212) 406-2810

504

tz on 201) 257-6850(800) 3 APPEAL*NY (212) 840-4640°MA (617) 542-1114

uters.ine. DC (202) 783-7288°PA (215) 925-6500°USA (800) 5 APPEAL

2O

TABLE OF CONTENTS

Page

I OP I ev ones eke biteuccansces Shr I

GG re 6

Be PR Oe I Is cose diccccdrbdccescteaos 6

Il. A disclosed business relationship is not a

constitutionally recognized ground for vacatur.... 8

[I]. Petitioner waived his objections to the arbitrators. 10

[V. The state court’s factfinding is not reviewable under

the circumstances of this case. ................. 12

Ws Wee ID Or PRPS Soe vec ce docectwssesde.s 14

eg ee eR ee Oe ee a eae ae 6

TABLE OF CITATIONS

Cases Cited:

Aetna Life Insurance v. Lavoie, 475 U.S. 813 (1986)

PPR PTE PY EEE ee SEVER OTTO RET EEE OEE Fre rr 9, 10

Austern v. Chicago Board Options Exchange, Inc. 718 F.

Re OE ee 6

Brill v. Muller Brothers, Inc., 22 A.D. 2d 678, 253 N.Y.S.

ee ee ey ee SED cs 5 nny os abedee batee ie uh 13

il

Contents

Page

Cobb v. Georgia Power Co., 757 F.2d 1248 (11th Cir. 1985)

iwiceeseeeu eh shoes aS eeu ea oe 6

Columbe v. Connecticut, 367 U.S. 568 (1961) .......... 12

Commonwealth Coatings Corp. v. Continental Casualty Co.,

Fe US. 306 CRD o.oo 9 kn 0k0ess50eskee eee 9, 10

Cross Properties v. Gimbal Bros. Inc., 15 A.D. 2d 913, 225

N.Y.S. 2d 1014 (First Dep’t 1962), aff’d., 12 N.Y. 2d

806, 236 N.Y.S. 2d 61, 187 N.E. 2d 129 (1962)..... 10

Dennis v. Sparks, 449 U.S. 24 (1980).................. 6

East India Trading Co. v. Carmel Exporters and Importers,

Lid., 97 N.Y.S. 2d 556 (Sup. Ct. N.Y. Co. 1950), aff’d.,

278 App. Div. 757, 103 N.Y.S. 2d 1021 (First Dep’t 1951)

pedclne tie¥6eb0s ces Uh ead ee bee heel eee 11

Elmore v. Chicago Illinois Midland Ry. Co., 782 F.2d 94 (7th

Car; GUD 65.060 0-000005 06 vaednae ease eee 6

F.D.I.C. v. Air Florida System Inc., 822 F.2d 833 (9th Cir.

1987), cert. denied, 485 U.S. 987 (1988) ........... 6

Goltz v. Ripps, 88 A.D. 2d 1052, 452 N.Y.S. 2d 681 (Third

US DIRGD 6 bc cond one60aes-enssss 4454 12, 13

Johnson v. Zerbst, 304 U.S. 458 (1938)................ 11

J.P. Stevens and Co. v. Rytex Corp., 34 N.Y. 2d 123, 356

N.Y.S. 2d 278, 312 N.E. 2d 466 (1974) ............ 10

il

Contents

Page

Lastmor Products Manufacturing Corp. v. Storozom, 279

App. Div. 748, 108 N.Y.S. 2d 317 (2nd Dep’t 1951),

ME MO OND oo ccc cacsccessccces 10

Lipschutz v. Gordon Jewelry Corp., 373 F. Supp. 375 (S.D.

Ls co nsadevneccesevees 2, 13

Martin-Trigona v. Champion Federal Savings & Loan Assoc.,

ew OME M,N, co ccc ces rcscccscess 14

Matter of Siegel (Lewis), 40 N.Y. 2d 687, 389 N.Y.S. 2d 800,

ccc cere ccceneceves 10

Matter of Spritzen (Nomberg), 46 N.Y. 2d 623, 415 N.Y.S.

ee 12, 15

Matter of S. Weiner Furniture Co. Inc., 90 A.D. 2d 875, 456

uu. 20 474 (ree Dep't 196Z).........cccccee. 12

Mount St. Mary’s Hospital v. Catherwood, 26 N.Y. 2d 493,

260 N.E. 2d 508, 311 N.Y.S. 2d 863 (1970) ......... 7,8

N.C.A.A. v. Tarkinian, 488 U.S. 179 (1988), aff’d. on other

grounds, 898 F.2d 882 (2d Cir.), cert. denied, ___ U.S.

ee 6

North American Foreign Trading Corp. v. Rosen, 73 A.D.

2d 883, 424 N.Y.S. 2d 8 (First Dep’t 1980)......... 13

Ottley v. Mostoff, 79 A.D. 2d 964, 435 N.Y.S. 2d 279 (First

Dep’t 1981), aff’d., 54 N.Y. 2d 698, 442 N.Y.S. 2d 989,

ED oc sccccrcenecvccesesesoves 12

iv

Contents

Patterson v. New York, 432 U.S. 197 (1977) ........... 8, 12

Perl v. General Fire & Casualty Co. 34 A.D. 2d 748,

310 N.Y.S. 2d 196 (First Dep’t 1970).............. 13

Shearson/ American Express, Inc. v. McMahon, 482 U.S. 220

ee en pr a en er eee 15

Sterling Cheek v. Chubb & Sons Inc., 70 A.D. 2d 622, 416

ee me Rica fe 8 ere 10, 11

St. George Textile Corp. v. Brookside Mills Inc., N.O.R.,

85 N.Y.S. 2d 621 (Sup. Ct. N.Y. Co. 1948) ........ 10

Thermasol Ltd. v. Drieske, 78 A.D. 2d 838, 433 N.Y.S. 2d

166 (First Dep’t 1980), aff’d., 52 N.Y. 2d 1069, 438

N.¥.3. 26 320, 430 ME. Eo SBE (ISSS).. oo vvsccves 13

ae es BO eee ee 9, 10

United States v. American Soc. of Composers, Authors &

Publishers, 708 F. Supp. 95 (S.D.N.Y. 1989) ....... 7

United States Constitution Cited:

Pe eligi vee 6 sence iad inde venenecetes 12

PE II <6 po Go 4 ee Cb ness Ree ev bees ae 5, 6, 10

Rules Cited:

Federal Rule of Civil Procedure 56(c).................. 13

Contents

Page

a E -. s e 15

Other Authority Cited:

New York Civil Practice Law and Rules, Article 75..... 2, 13

APPENDIX

Appendix A — Excerpts from Affirmation of Hyman Bravin,

Esq. in Support of Petitioner’s Motion for Leave to

Appens TNROG FUG G, IDG ow vc ccc ccccaccsceuss Ira

Appendix B — Excerpts of Petitioner’s Motion for Leave to

Appeal Dated November 13, 1990.................. 2ra

Appendix C — Excerpts of Affidavit of Abe Kaufman Sworn

© Ff PPT OCRT TUTTO e. Teer eee dra

Appendix D — Excerpts from Affirmation of Benjamin P.

Eisenberger, Esq. Dated April 10, 1988 ............ 6ra

Appendix E — Excerpts of Exhibit Attached to Affidavit of

Abe Kaufman Sworn to on April 29, 1988 ......... 7ra

Appendix F — Excerpts of Affirmation of Hyman Bravin,

Esq. Dated May 19, 1968 ..........ccccccccvccoes 8ra

No. 90-1705

In The

Supreme Court of the United States

October Term, 1990

ELI MIRZOEFF,

Petitioner,

vs.

MOTI NAMDAR,

Respondent.

On Petition for Writ of Certiorari to the Supreme Court of the

State of New York, Appellate Division, First Judicial Department

BRIEF FOR RESPONDENT IN OPPOSITION

STATEMENT OF THE CASE

Petitioner and respondent, both members of the Diamond

Dealers Club (DDC), submitted a controversy to a private,

voluntary arbitration before an arbitration tribunal of the DDC.

The five-member neutral arbitration panel was selected by the

parties, and consisted of three chairman and two additional

arbitrators.

It was undisputed that respondent had delivered a sapphire

tO petitioner on a ‘‘memorandum”’ basis. A memorandum serves

as a receipt and a contract and its terms may not be contradicted

by parol. Lipschutz v. Gordon Jewelry Corp. 373 F. Supp. 375,

387 (S.D. Tex. 1974). Respondent commenced the arbitration

proceeding when petitioner refused to return the gem. Petitioner

contended that he had returned the gem to respondent’s brother-

in-law in a chance encounter in an elevator but neglected to request

return of the signed memorandum. Respondent produced the

signed original memorandum at the arbitration (6ra).' The

arbitrators held hearings over the course of two days and both

parties, represented by their respective counsel, offered testimony

and conducted cross-examination (22a, 4ra). Petitioner was

represented by the former genera! counsel to the DDC (24a).

The panel unanimously rendered an award in respondent’s

favor. A key factor compelling the award was petitioner’s failure

to comply with a DDC by-law relating to custom and usage.

Specifically, Section 4 of Article XIX of the by-laws provides

as follows:

Memorandums. No goods shall be given or

received without a signed memorandum, and any

return of goods must be acknowledged in writing

or by the return of the signed memorandum.

(6ra).

Respondent commenced an Article 75 proceeding under the

New York Civil Practice Law and Rules to confirm the arbitration

award. Petitioner opposed confirmation on the following grounds:

that the arbitrators were a// biased against petitioner based on

|. The designation ‘‘ra’’ preceded by a page number refers to respondent’s

’

appendix; ‘‘a’’ refers to petitioner’s appendix.

petitioner’s subjective interpretation that he violated the tenets

of his religious faith by initiating criminal charges against a fellow

member of his faith; that errors were committed in evidentiary

rulings; that one of the arbitrators allegedly conducted an

‘independent investigation’’; and that petitioner had not entered

intO a contract with respondent (10-13a).’

[In addition, petitioner alleged that one of the five arbitrators,

Kaufman, allegedly asked to purchase a diamond ring he was

wearing. This allegation was devoid of any detail except that

petitioner rejected the arbitrator’s offer as ‘‘too low’’. The ask

and bid prices were not furnished. Significantly, petitioner had

continued with the arbitration without raising any objection and

without informing anyone of the allegations.

In response to this allegation, Kaufman submitted a detailed

factual affidavit denying that any negotiations took place during

the pendency of the arbitration proceeding (20-23a, 4-5ra).

Petitioner did not reply to the arbitrator’s affidavit although he

submitted an affirmation by his former attorney which did not

contradict Kaufman’s affidavit (24-25Sa).

The trial court rejected petitioner’s latter claim on several

grounds (10-13a). The court found that petitioner had failed to

sustain his burden of proof with respect to the arbitrator’s alleged

misconduct by a standard of ‘‘clear and convincing’’ evidence.

Additionally, the court held that under New York law, a disclosed

relationship (in contrast to an undisclosed relationship) between .

a party and an arbitrator may not form the basis for vacatur of

the award on the grounds of ‘“‘partiality’’ if the objecting pariy

selected the arbitrator and voiced no objection to the disclosed

facts. The facts complained of here, were clearly disclosed to

2. These grounds were rejected by the lower court and the Appellate Division

and are not presented for review to this Court.

petitioner (although undisclosed to respondent). Finally, the lower

court held that petitioner waived his claim by continuing to proceed

with the arbitration without objection. The court found that the

doctrine of waiver was particularly appropriate where Kaufman's

vote was surplusage in a five to none decision.

A five-member panel of the Appellate Division unanimously

affirmed the order and judgment of the trial court. Significantly,

that court made the following key finding of fact:

Upon our review of this record, we conclude that

Mirzoetf has not sufficiently demonstrated Ais

allegations of the arburator’s misconduct.

(6a) (emphasis added).

The frivolous and misleading nature of the petitioner’s present

position is characterized by his allegation that the reference in

the court's decision to the failure of proof refers to issues **not

presented herein’’ (Pet. for Cert. at 8). The Appellate Division,

clearly, and beyond any shadow of a doubt, did find a failure

of proot with regard to petitioner’s *‘allegations of the arbitrator’s

misconduct.”

Petitioner’s argument that this Court is not bound by the

Appellate Division's factfinding and request that this Court

‘*scrutinize’’ the record is disingenuous in light of the petitioner’s

tailure to reproduce here the complete record, or at the very least.

the relevant parts thereof. By omitting over ninety percent of the

record and taking the cutting knife to affidavits in presenting

isolated paragraphs of affidavits out of context, petitioner cannot

be serious about having this Court ‘‘scrutinize’’ the record.

Petitioner’s **statement of facts’’ deviates from the facts presented

in the record before the lower court and the Appellate Division.

For example, it was not ‘“‘undisputed’’ that Kaufman negotiated

with petitioner for the sale of a ring while the arbitration was

pending.

Finally, and of critical importance on this application,

petitioner has not preserved his Fourteenth Amendment due

process violation claim since this claim was never raised at any

level of the proceedings. While there may have been a casual and

indirect reference to the ‘‘due process clause’’ in petitioner’s

appellate brief, there was certainly no mention of the Fourteenth

Amendment to the United States Constitution. Petitioner never

briefed this point, and petitioner did not raise these points in his

proposed certified questions on motions for leave to appeal to

the Appellate Division and to the Court of Appeals (1-3ra).

The Fourteenth Amendment due process claim was first raised

on petitioner’s motion for rehearing of the Court of Appeals’

denial of his motion for leave to appeal to that court. In the motion

for rehearing, petitioner also moved for amendment of the court's

remittitur, to provide that the constitutional issue had been

‘*necessarily raised and considered.’’ That motion was denied.

REASONS FOR DENYING THE WRIT

I.

Absence of State Action

It is undisputed that a private, vo/untary arbitration such

as the one herein cannot be considered state action for the purposes

of a due process deprivation claim under the Fourteenth

Amendment. Austern v. Chicago Board Options Exchange, Inc.

716 F. Supp. 121, 125 (S.D.N.Y. 1988) (where the District Court

relied upon N.C.A.A. v. Tarkinian, 488 U.S. 179, 197-198 (1988)

‘protections of the Fourteenth Amendment do not extend to

private conduct abridging individual rights.’’), aff’d on other

grounds, 898 F.2d 882 (2nd Cir.), cert. denied, __. U.S. ___,

112 L: Ed. 2d 107 (1990); F.D.L.C. v. Air Florida System Inc.,

822 F.2d 833, 842 at fn. 9 (9th Cir., 1987), cert. denied, 485 U.S.

987 (1988); Elmore v. Chicago Illinois Midland Ry. Co., 782 F.2d

94, 96 (7th Cir. 1986).

The mere confirmation of the arbitration award by the state

court standing alone, cannot be considered state action. A party

who has obtained a state court order or judgment is not engaged

in “*state action’’ merely because it used the state court legal

process. Cobb v. Georgia Power Co., 757 F.2d 1248, 1251-1253

(lith Cir. 1985).

The Circuit Court in Cobb, supra, in considering state action

under a § 1983 action, distinguished Dennis v. Sparks, 449 U.S.

24 (1980) relied on by petitioner, since that case involved an

allegation of a conspiracy between a state officer and a private

party. The court in Cobb, concluded that ‘‘something more’’ than

a state judgment standing alone is required to satisfy the presence

of *‘state action’’. /d. at 1251.

The record here shows no state action beyond the mere

ministerial act of confirmation of a private arbitration award.

Similarly, in United States v. American Soc. of Composers,

Authors & Publishers, 708 F. Supp. 95, 96-97 (S.D.N.Y. 1989)

the District Court rejected petitioner’s due process violation claim

due to his failure to demonstrate any state action. Petitioner’s

claim of state action was premised upon the court’s approval of

a conseni decree which required the establishment of a grievance

procedure.

The District Court there rejected petitioner’s claim in reliance

on and citing from the decision in Mount St. Marvy’s Hospital

v. Cutherwood, 26 N.Y. 2d 493, 500, 260 N.E. 2d 508, S511, 311

N.Y.S. 2d 863, 867 (1970):

The simple and ineradicable fact is that voluntary

arbitration and compulsory arbitration are

fundamentally different if only because one may,

under our system, consent to almost any restriction

upon or deprivation of right, but similar

restrictions or deprivations if compelled by

government, must accord with procedural and

substantive due process.

708 F. Supp. 95, at 96-97.

The court thereupon rejected petitioner’s reasoning as follows:

Indeed, under Karmen’s strained interpretation of

Mount St. Marv’s, all arbitrations could be subject

to due process limitations through the simple act

of appealing the arbitrator’s decisions to the court

system. Such a situation would negate the purpose

of Article 75 which has long had an important

function.

Id. at 97.

Since the underlying voluntary arbitration action was private,

the mere confirmation by the state court did not give rise to any

state action, especially in light of the petitioner’s failure to allege

any independent wrong committed by the state court or

‘something more’’ than the mere ministeria! act of confirmation.

To hold otherwise would in the words of the District Court,

**negate the purpose of Article 75°" and render every private

arbitration decision subject to collateral attack by virtue of mere

confirmation by a state court.

Finally, the underlying claim raised by petitioner does not

otfend some principle of justice so rooted in the traditions and

conscience of our people so as to be ranked as fundamental and

to warrant interference with the power of the state to regulate

procedures under which its laws are carried out. Patterson v. New

York, 432 U.S. 197, 201-202 (1977).

Were this Court to find state action in the mere ministerial

act of a state court’s confirmation of an arbitration award, then

the floodgates of litigation would open to every disgruntled party

to an arbitration. This would defeat the long stated federal and

New York State policy of favoring arbitration as a method of

dispute determination.

A disclosed business relationship is not a constitutionally

recognized ground for vacatur.

Both the lower Court and the Appellate Division found that

the alleged business relationship between Mirzoeff and Kaufman,

if true, was obviously disclosed to Mirzoeff. The cases dealing

with *‘undisclosed’’ business relationships cited by petitioner are

simply not relevant to the facts of this case.

Commonwealth Coatings Corp. v. Continental Casualty Co.,

393 U.S. 145 (1968), relied on heavily by petitioner, involved an

undisclosed business relationship between the on/y neutral

arbitrator and the prevailing party in an arbitration conducted

under the United States Arbitration Act. There, the Court limited

its ruling requiring vacatur of an award based on nondisclosure

tO arbitrations arising under the federal statute.

While the Court in Commonwealth, citing Tumey v. Ohio,

273 U.S. 510 (1927) declared that the rule presuming bias based

on undisclosed facts of a pecuniary interest was a constitutional

one in the case of courts, it did not extend this rule to arbitration

cases arising under state law. Justice White in his concurring

opinion (joined by Justice Marshall) explained that the decision

does not hold arbitrators to standards of ‘‘judicial decorum.’’

Parenthetically, Justice White also recognized that an award would

not be vacated if a party failed to object to a disclosed relationship.

The other state cases cited by petitioner also involve

‘*undisclosed’’ business relations. Clearly, none of these cases are

applicable here where the relationship was a disclosed one and

petitioner failed to object. Petitioner has failed to cite even one

case where a disclosed relationship was the basis for vacatur of

an award.

In Aetna Life Insurance v. Lavoie, 475 U.S. 813, 827-828

(1986) the Court declined to extend the rule requiring reversal

of a judgment to a situation where the disqualified judge’s vote

was mere surplusage.’

3. The Court in Aetna Life Insurance v. Lavoie, 475 U.S. 813, 825-826

at fn. 3, specifically criticized the Commonwealth Coatings Corp. decision in

(Cont'd)

10

In Commonwealth, supra, the failure of the so/e neutral

arbitrator to disclose the prior business relationship resulted in

his disqualification. In Aerna, the disqualified judge’s vote was

decisive in a five to four decision. Tumey, supra, involved a single

judge.

In our case, however, even if Kaufman was disqualified, his

vote was mere surplusage under the five to none unanimous

decision. New York courts have consistently upheld arbitration

decisions where the vote of the ‘‘disqualified’’ or ‘‘biased’’

arbitrator was mere surplusage. Lastmor Products Manufacturing

Corp. v. Storozom, 279 App. Div. 748, 108 N.Y.S. 2d 317 (2nd

Dep’t 1951), aff’d., 304 N.Y. 597 (1952); St. George Textile Corp.

v. Brookside Mills Inc., N.0.R., 85 N.Y.S. 2d 621 (Sup. Ct. N.Y.

Co. 1948).

Hl.

Petitioner waived his objections to the arbitrators.

As an additional ground in support of confirmation, both

the lower court and the Appellate Division found that under New

York law, petitioner had waived objections to the arbitrators based

on facts clearly disclosed to him (6-7a, 11-12a). See, e.g., Matter

of Siegel (Lewis), 40 N.Y. 2d 687, 690, 389 N.Y.S. 2d 800, 802,

358 N.E. 2d 484, 486 (1976); J.P. Stevens and Co. v. Rytex Corp.,

34 N.Y. 2d 123, 129, 356 N.Y.S. 2d 278, 282, 312 N.E. 2d 466,

469 (1974); Cross Properties v. Gimbal Bros. Inc., 15 A.D. 2d

913, 225 N.Y.S. 2d 1014, 1016 (First Dep’t 1962), aff’d., 12 N.Y.

2d 806, 236 N.Y.S. 2d 61, 187 N.E. 2d 129 (1962); Sterling Cheek

(Cont'd)

reading Tumey v. Ohio as constitutionalizing any rule that a decision rendered

by a judge with the ‘‘slightest pecuniary interest’’ constitutes a violation of the

Due Process Clause.

v. Chubb & Son Inc., 70 A.D. 2d 622, 416 N.Y.S. 2d 313, 314

(2nd Dep’t 1979); East India Trading Co. v. Carmel Exporters

and Importers Lid., 97 N.Y.S. 2d 556, 559-560 (Sup. Ct. N.Y.

Co. 1950), aff’d., 278 App. Div. 757, 103 N.Y.S. 2d 1021 (First

Dep’t 1951).

The finding of petitioner’s waiver was further buttressed by

petitioner’s continuation of the arbitration without written

objection as required by Section 13 of the DDC arbitration by-

laws (7ra). In fact, although petitioner’s counsel did file written

objection concerning evidentiary rulings (8ra), no objection was

filed with respect to the arbitrator’s alleged impartiality.

Contrary to petitioner’s present contentions, his silence in

failing to object to the arbitrator was deliberate and knowing

behavior unlike the facts in Johnson v. Zerbst, 304 U.S. 458 (1938)

where a defendant’s waiver of his right to counsel in a criminal

matter was in issue. Here, petitioner was represented by an attorney

who was a former general counsel to the DDC (24a).

Furthermore, the waiver was not of a ‘‘constitutional

principle’ but of the evidentiary right to object to an arbitrator

selected by the party in the context of this fact situation where

petitioner with full knowledge of the facts chose not to object.

Finally, the equitable doctrine of unclean hands should be

applied to bar the petitioner from coming forward after an adverse

decision when he kept Ais conduct secret from his adversary in

the hopes of possibly influencing the arbitrator to render a decision

in his favor.

12

IV.

The state court’s factfinding is not reviewable under the

circumstances of this case.

The Supreme Court has stated that it will normally not disturb

a state court’s finding of fact. **. . .[I]t is normally within the

power of the State to regulate procedures under which its laws

are carried out including the burden of producing evidence and

the burden of persuasion.’ Patterson v. New York, supra, 432

U.S. at 201.

Even in a case where constitutional principles are present,

unlike here, the findings of a state court concludes the Supreme

Court except where the finding is wholly lacking support in

evidence. Columbe v. Connecticut, 367 U.S. 568, 603 (1961).

The factual finding by the Appellate Division that petitioner

did not sufficiently demonstrate his allegation of arbitra‘or’s

misconduct (6a) is a predicate finding of fact in a procedural

context unlike the substantive, constitutional factfinding in the

First Amendment cases cited by petitioner (Pet. for Cert. at 8).

Since arbitration proceedings are favored by New York law

as a desirable alternative to litigation, its courts have fostered

a clear judicial policy in favor of non-interference with this form

of dispute resolution. Matter of Sprinzen (Nomberg), 46 N.Y.

2d 623, 629, 415 N.Y.S. 2d 974, 976, 389 N.E. 2d 456, 458 (1975).

In furtherance of the foregoing policy, New York law places the

burden of proof on a party alleging the arbitrator’s bias or

misconduct which must be shown ‘‘clearly and convincingly.”’

Ottley v. Mostoff, 79 A.D. 2d 964, 435 N.Y.S. 2d 279, 280 (First

Dep’t 1981), aff’d., 54 N.Y. 2d 698, 442 N.Y.S. 2d 989, 426 N.E.

2d 483 (1981); Matter of S. Weiner Furniture Co. Inc., 90 A.D.

2d 875, 456 N.Y.S. 2d 474, 475-476 (Third Dep’t 1982); Goltz

13

v. Ripps, 88 A.D.2d 1052, 452 N.Y.S. 2d 681, 682 (Third Dep’t

1982).

It is within the trial court’s discretion on an Article 75

application to grant confirmation based on the affidavits presented

or to grant a hearing, where required. North American Foreign

Trading Corp. v. Rosen, 73 A.D. 2d 883, 424 N.Y.S. 2d 8 (First

Dep’t 1980).

While the court must make a threshold determination as to

the allegations, Thermasol Lid. v. Drieske, 78 A.D. 2d 838, 433

N.Y.S. 2d 166, 167 (First Dep’t 1980), aff’d., 52 N.Y. 2d 1069,

438 N.Y.S.2d 520, 420 N.E. 2d 401 (1981), a hearing is not required

based on allegations of a mere suggestion of partiality which does

not satisty the ‘‘clear and convincing’’ standard. Brill v. Muller

Brothers Inc., 22 A.D. 2d 678, 253 N.Y.S. 2d 391 (First Dep’t

1964); Perl v. General Fire & Casualty Co. 34 A.D. 2d 748, 310

N.Y.S. 2d 196, 198 (First Dep’t 1970).

Since under New York law, petitioner did not meet his

procedural burden of alleging misconduct by the ‘‘clear and

convincing’ standard, no evidentiary hearing was required.*

Petitioner’s reference to Rule 56(c) of the Federal Rules of

Civil Procedure is not ‘‘analogous’’, since a disgruntled party to

an arbitration who accuses an arbitrator of misconduct must satisfy

a higher burden. The ‘‘clear and convincing”’ standard is certainly

a rational one, or else every dissatisfied party to an arbitration

can defeat the purpose of arbitration by a conclusory, sour grapes

allegation that the arbitrator was biased or committed misconduct

4. We submit that petitioner would have failed to satisfy his burden even

under a Federai Rule 56 motion since a party opposing a motion for summary

judgment is not entitled to hold back evidence until the time of trial. Lipschutz

v. Gordon Jewelry Corp., 373 F. Supp. 375, 384 (S.D. Texas, 1974).

14

in one form or another.

Petitioner’s allegation concerning Kaufman’s alleged

misconduct was totally devoid of detail. The ‘‘low’’ offer for the

ring was not furnished. The date, time, other circumstances and

whether or not any witnesses were present was not furnished. By

contrast, Kaufman submitted a detailed factual affidavit in

addition to the affidavit submitted by respondent and respondent’s

counsel. Although petitioner was afforded an opportunity to reply

to Kaufman’s affidavit, he failed to do so. Under these

circumstances, the lower court and the Appellate Division properly

found that petitioner failed to meet the ‘‘clear and convincing”’

standard.

The petition is frivolous.

We respectfully submit that the instant petition for a writ

of certiorari is frivolous for several reasons. The petitioner has

failed to demonstrate that a justiciable federal question is present,

due to the fact that the Fourteenth Amendment due process claim

was not raised in the state courts and also due to the absence

of state action. See, e g., Martin-Trigona v. Champion Federal

Savings & Loan Assoc., 892 F.2d 575, 577 (7th Cir., 1989).

Additionally, petitioner has attempted to misrepresent the

state court’s clear finding of facts with respect to petitioner’s failure

to demonstrate the arbitrator’s misconduct, the finding that the

alleged bias was ‘‘disclosed’’ to petitioner, and by incorrectly

referring to Kaufman as a “‘tainted’’ arbitrator when no bias was

found by the court.

When petitioner and respondent agreed to the arbitration,

they entered into a prospectively economical, favored alternative

15

means of civil dispute resolution. Shearson/American Express,

Inc. v. McMahon, 482 U.S. 220, 226 (1987); Matter of Sprinzen,

supra.

Instead of an economical dispute resolution, respondent

Namdar was given a lesson in the economics of civil litigation.

Petitioner not only vigorously contested confirmation of the

award, but appealed the case through the New York court system.

Petitioner, undeterred by a unanimous affirmance of the Appellate

Division, moved to the Appellate Division for leave to appeal

to the Court of Appeals. Upon denial of the motion without

dissent, petitioner moved directly to the Court of Appeals for

leave to appeal. The motion was again denied without dissent.

Sull unremorseful, petitioner moved for rehearing and moved to

amend the remittitur to provide that a constitutional issue had

been necessarily raised and considered. That motion was also

denied without dissent, and petitioner filed the instant petition.

In view of the foregoing, we submit that this is an appropriate

case for this Court to award respondent damages in the sum of

Ten Thousand ($10,000) Dollars pursuant to Rule 42(2) of the

Rules of the Supreme Court of the United States together with

an award of double costs.

16

CONCLUSION -

The petition for a writ of certiorari should be denied and

an award of damages should be granted to respondent for

petitioner’s filing of a frivolous petition.

Dated: New York, New York

May 31, 1991

Respectfully submitted,

BENJAMIN P. EISENBERGER

Counsel of Record

LEWISOHN, EISENBERGER

& FUCHS

Attorneys for Respondent

321 Broadway

New York, New York 10007

(212) 406-2810

Ira

APPENDIX A — EXCERPTS FROM AFFIRMATION OF

HYMAN BRAVIN, ESQ. IN SUPPORT OF PETITIONER’S

MOTION FOR LEAVE TO APPEAL DATED JULY 6, 1990

The respondent-appellant now seeks permission of this Court

tO appeal to the Court of Appeals on two certified questions:

1. Whether an arbitrator participating in an arbitration

process can simultaneously engage in negotiations to purchase

a diamond ring from a party and not disclose his self-dealing

transaction to the other party and the other members of the

panel?

2. Did the arbitrator who negotiated with Mirzoeff, a

party, to purchase his 10-carat diamond ring and failed to

disclose said negotiations to the other party and the other

members of the arbitration panel commit misconduct in

violation of CPLR 7511 (subd. (b) |. cl. (i)?

2ra

APPENDIX B — EXCERPTS OF PETITIONER’S MOTION |

FOR LEAVE TO APPEAL DATED NOVEMBER 13, 1990

COURT OF APPEALS

STATE OF NEW YORK

In the Matter of the

ARBITRATION OF CERTAIN CONTROVERSIES BETWEEN

MOTI NAMDAR,

Petitioner-Respondent,

-against-

ELI MIRZOEFF,

Respondent-Appeilant.

APPLICATION FOR LEAVE TO APPEAL

Questions Presented

This application by Respondent-Appellant, Eli Mirzoeff

(hereinafter **Mirzoeff"’), which warrants review by the Court,

presents novel and complex questions of overriding importance

to members of international and national trade associations located

in New York who settle their business disputes with other members

through compulsory arbitration. Both parties herein are members

of the Diamond Dealers Club (**D.D.C.""), the leading diamond

bourse in the world, which has its own arbitration panels, made

up of elected members:

1. Whether an arbitrator participating in arbitration

hearings can simultaneously engage in negotiations to

jra

Appendix B

purchase a diamond ring from Mirzoeff, a party and not

disclose his self-dealing transaction to the other party and

the other members of the arbitration panel?

2. Did the arbitrator who negotiated with Mirzoeff, a

party, to purchase his 10-carat diamond ring and failed to

disclose said negotiations to the other party and the other

members of the arbitration panel commit misconduct in

violation of CPLR 7511.

4ra

APPENDIX C — EXCERPTS OF AFFIDAVIT OF ABE

KAUFMAN SWORN TO ON APRIL 29, 1988

12. The proceedings were conducted with civility and in

accordance with the due process rights of all concerned parties.

Both sides, represented by counsel, presented their documents and

witnesses and their respective attorneys conducted extensive

cross-examination.

13. During the course of the proceedings, there was not at

any time any objection by the parties or counsel to the members

of the panel and there were no charges of bias or prejudice.

Further, no objections were made by Mr. Mirzoeff or his attorney

at the proceeding of the matters which he now raises in his papers.

This is the first time | have heard of such objections.

14. At the conclusion of the arbitration, the arbitrators

examined and reviewed all of the facts as sophisticated merchants

in accordance with their understanding of American Civil Law

and trade customs and practices. There was no bias or prejudice

in any of the deliberations or conduct of the proceedings. There

was no discussion of Jewish Law in the conduct of the proceedings

or in the deliberations.

23. The matter of the diamond ring played no part in my

deliberations with the other members of the Panel. In fact, on

February 9, 1988 when we concluded the hearing and commenced

deliberations, it was a dead issue in my mind. Mr. Mirzoeff had

not gotten back to me concerning anything relating to the ring.

Since | had no great interest in purchasing this ring, and since

there was nothing further pending, I wasn’t even consciously aware

of this matter. The unanimous award by the arbitrators was based

solely on the facts presented and our understanding of the

Sra

Appendix C

applicable law. There was absolutely no bias or prejudice in the

conduct of the proceeding, the deliberations thereon and the

rendering of the award.

6ra

APPENDIX D — EXCERPTS FROM AFFIRMATION OF

BENJAMIN P. EISENBERGER, ESQ. DATED APRIL 20, 1988

4. Mr. Mirzoeff raised the defense that the sapphire had been

returned to Mr. Namdar’s brother-in-law in the elevator of the

building wherein Mr. Namdar’s offices are located. Mr. Namdar’s

brother-in-law denied these charges. It was undisputed that Mr.

Namdar retained possession of the original memorandum signed

by Mr. Mirzoeff’s authorized agent. Section 4 of Article XLX

of the Diamond Dealers Club Inc. by-laws, relating to custom

and usage trade rules, is the controlling section. Section 4 states

as follows:

‘**Memorandums. No goods shall be given or

received without a signed memorandum, and any

return of goods must be acknowledged in writing

or by the return of the signed memorandum.”’

(emphasis added)

Tra

APPENDIX E — EXCERPTS OF EXHIBIT ATTACHED TO

AFFIDAVIT OF ABE KAUFMAN SWORN TO ON APRIL 29,

1988

Sec.13b. Hearing: The parties are entitled to be heard, to present

evidence, to cross-examine witnesses and have the right

to be represented by an attorney. Nowithstanding the failure

of a party duly notified to appear, the arbitrators may hear

and determine the controversy upon the evidence produced.

Sec.l3c. Waiver: Except the right to representation by an

attorney a requirement of section 13b may be waived by

written consent of the parties and it is waived if the parties

continue with the arbitration without written objection.

8ra

APPENDIX F — EXCERPTS OF AFFIRMATION OF HYMAN

BRAVIN, ESQ. DATED MAY 19, 1988

5. As another point, I call the attention of the Court to the

fact that the last session of the Appeai Committee took place

on February 9, 1988. During the last session, in my professional

opinion, a prejudicial and inaccurate statement was made by the

attorney for NISSIM/NAMDAR. I wrote a protesting letter to

KAUFMAN; hand-delivered it with enough copies for each

member of the Appeal Committee Panel; and also hand-delivered

a copy to said attorney for the complainants. | append* as Exhibit

**4’" a copy of my February 10, 1988 letter along with the reply

of the attorney for NISSIM/NAMDAR, dated February 11, 1988.

It is submitted that KAUFMAN received both letters before a

decision was rendered on February /2 (not February ‘‘10’’ as stated

in KAUFMAN’s affidavit of April 29, 1988).

* Omuted herein.

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